Raised 340K to close 1st Multi-Family Syndication!

17 Replies

For the last 3 years investing in real estate, I had 2 major goals I wanted to accomplish: 1. Complete an apartment complex syndication & 2. Own 25 units by the age of 25. As of this week, my partner and I closed on a 42-unit apartment complex in Milwaukee, WI making 65 units under management! 

The last 2 months have been busy, raising upwards of 340K to close on this beaut. With investors, whom have never invested in real estate before resulting in tons of questions and concerns that were handled responsively. 

Our investors will plan to receive 8% ROI or more paid out quarterly with anywhere from a 5-10 yr holding period depending on the market.

Adam McCarthy did an outstanding job utilizing his sources to find the deal, secure great terms, a thorough inspection, and detailed paperwork from his syndication attorney.

Everything happened so quickly and throughout the process I was able to learn a ton of information that will help with future deals. Now, its time to start the process all over again!





@Cal Rohrman , interesting story.  How did you go about lining up your first $340K in investor money?  Where did you find them?  Did you have deals ready to go or did you find the money first then find the deals?

@Erik W. The capital was raised from family and friends that knew what I have been up to these past few years. I was able to leverage what I have done up until this point and use that as credibility moving forward. My business partner Adam, notified me of the deal and said we only have a few months to get this done, the rest was history. 

Thanks @Lucas Miller . I raised the capital through relationships made in the past that knew what I've been doing for the past 3 years. Once we ran the numbers and knew we liked this deal, I created a pamphlet that outlined important details and met with each investor to go over everything in depth. As expected I was denied on multiple occasions, but in the long run I was still able to raise enough to close. 

@Cal Rohrman congratulations and well done! 

I am generally optimistic about the market. Maybe you have heard me talk about the future real estate market - I have taken a lot of heat online and at panel discussions for my optimistic views: everyone has real estate PTSD from 2010, but when you look at the last 5 recessions only the last one has seen massive devaluation. During the rest values went sideways or even up.

However, I am a "hope for the best, prepare for the worst" guy - and here is my point. You have grown fast over the last two years, make sure you grown deep now. Build some reserves and/or create equity through improvements and raised rents. Expand you credit basis (and let it sit idle). We may not see a real estate downturn, but there are other adverse factors that can impact you, and the last thing you want to is go backwards, because you are stretched to thin.

Originally posted by @Steve K. :

how much were the attorney fees?

why not just have them be partners on the deal rather than syndicating?

Every capital contributor is considered a "limited partner". You still need to use a syndication attorney for the SEC, loan approval, and just to make sure you are covered. I would highly recommend using an attorney for every large investment you make.  

 

Originally posted by @Marcus Auerbach :

@Cal Rohrman congratulations and well done! 

I am generally optimistic about the market. Maybe you have heard me talk about the future real estate market - I have taken a lot of heat online and at panel discussions for my optimistic views: everyone has real estate PTSD from 2010, but when you look at the last 5 recessions only the last one has seen massive devaluation. During the rest values went sideways or even up.

However, I am a "hope for the best, prepare for the worst" guy - and here is my point. You have grown fast over the last two years, make sure you grown deep now. Build some reserves and/or create equity through improvements and raised rents. Expand you credit basis (and let it sit idle). We may not see a real estate downturn, but there are other adverse factors that can impact you, and the last thing you want to is go backwards, because you are stretched to thin.

 Not sure why Marcus didn't get a vote but I would have voted for this post twice if I can.

I totally agree with you Marcus.

This is the reason why I actually became wealthier during the last Great Recession. When house flippers went from flipping houses to flipping burger, apartment owners like me actually MADE MORE money. 

My rents did not really drop - they just stayed the same. Moreover, I built reserves (operating and capital).

And all the cashflow and reserves I have built allowed me to buy the many foreclosures happening around me. My partner told me that at one point we were buying 1 out of 4 apartment buildings being sold in Cincinnati. Crazy!

The Great Recession was irrelevant to me. That's a benefit of buying a property right and building a substantial cash reserves.

Good work @Cal Rohrman ! 8% overall is a bit less than what most investors are looking for these days, do you think your investors were looking at other syndications and comparing, or was yours the only one?

Hey congrats @Cal Rohrman ! Curious, being it's a 42 unit, the numbers still made sense to syndicate? Reason why I ask, for deals that size usually a syndication doesn't make sense because of the fees. We would usually just JV something like that with a few partners involved.

Originally posted by @Tj Hines :

Hey congrats @Cal Rohrman ! Curious, being it's a 42 unit, the numbers still made sense to syndicate? Reason why I ask, for deals that size usually a syndication doesn't make sense because of the fees. We would usually just JV something like that with a few partners involved.s

I thought the same thing

see OP's reply to me above...

 

Originally posted by @Marcus Auerbach :

@Cal Rohrman congratulations and well done! 

I am generally optimistic about the market. Maybe you have heard me talk about the future real estate market - I have taken a lot of heat online and at panel discussions for my optimistic views: everyone has real estate PTSD from 2010, but when you look at the last 5 recessions only the last one has seen massive devaluation. During the rest values went sideways or even up.

However, I am a "hope for the best, prepare for the worst" guy - and here is my point. You have grown fast over the last two years, make sure you grown deep now. Build some reserves and/or create equity through improvements and raised rents. Expand you credit basis (and let it sit idle). We may not see a real estate downturn, but there are other adverse factors that can impact you, and the last thing you want to is go backwards, because you are stretched to thin.

Thanks for the advice Marcus. You make very good points, but please keep in mind i'm ready to buy more in case of a downturn. I will always have reserves. I also have a property management in place so from a capital improvement standpoint it's tough but I am always thinking of ways to receive more rents and improve the properties I own. Thanks again for your advice, I really appreciate you looking out. 

Originally posted by @Michael Ealy :
Originally posted by @Marcus Auerbach:

@Cal Rohrman congratulations and well done! 

I am generally optimistic about the market. Maybe you have heard me talk about the future real estate market - I have taken a lot of heat online and at panel discussions for my optimistic views: everyone has real estate PTSD from 2010, but when you look at the last 5 recessions only the last one has seen massive devaluation. During the rest values went sideways or even up.

However, I am a "hope for the best, prepare for the worst" guy - and here is my point. You have grown fast over the last two years, make sure you grown deep now. Build some reserves and/or create equity through improvements and raised rents. Expand you credit basis (and let it sit idle). We may not see a real estate downturn, but there are other adverse factors that can impact you, and the last thing you want to is go backwards, because you are stretched to thin.

 Not sure why Marcus didn't get a vote but I would have voted for this post twice if I can.

I totally agree with you Marcus.

This is the reason why I actually became wealthier during the last Great Recession. When house flippers went from flipping houses to flipping burger, apartment owners like me actually MADE MORE money. 

My rents did not really drop - they just stayed the same. Moreover, I built reserves (operating and capital).

And all the cashflow and reserves I have built allowed me to buy the many foreclosures happening around me. My partner told me that at one point we were buying 1 out of 4 apartment buildings being sold in Cincinnati. Crazy!

The Great Recession was irrelevant to me. That's a benefit of buying a property right and building a substantial cash reserves.

Yes, Micheal I may be growing at a fast rate but please note I'm prepared to buy in downturns. I'm not maxed out and unable to make capital improvements and future investments in case of a downturn, in fact i'm moving at a steady pace and beyond ready to take full advantage of a downturn with the investors I have lined up, capital reserves, and most importantly the connections I continue to make. 

Congratulations on taking advantage of the last recession, it seems you were prepared and executed to your fullest, well done. 
 

Originally posted by @Taylor L. :

Good work @Cal Rohrman! 8% overall is a bit less than what most investors are looking for these days, do you think your investors were looking at other syndications and comparing, or was yours the only one?

That's not true at all. If you've done any research you'd learn that limited partners in syndications receive anywhere from 6-10% (from cash flow, not appreciation). I know many syndicators that only offer 6% returns and they do very well. Look at the stock market over the years, i'd take 8% over 6-7%. My investors know this was a conservative 8% return. 

You may be thinking of real estate investors that invest in "themselves" and are responsible for putting everything together. Note, this is a 100% passive investment for my limited partners. 

Originally posted by @Cal Rohrman :
Originally posted by @Taylor L.:

Good work @Cal Rohrman! 8% overall is a bit less than what most investors are looking for these days, do you think your investors were looking at other syndications and comparing, or was yours the only one?

That's not true at all. If you've done any research you'd learn that limited partners in syndications receive anywhere from 6-10% (from cash flow, not appreciation). I know many syndicators that only offer 6% returns and they do very well. Look at the stock market over the years, i'd take 8% over 6-7%. My investors know this was a conservative 8% return. 

You may be thinking of real estate investors that invest in "themselves" and are responsible for putting everything together. Note, this is a 100% passive investment for my limited partners. 

There's no need to be hostile. 

I am a syndicator and I do syndicate multifamily. My investors expect more than 8%. Your original post implied that the investors' total return is 8%, where most of my investors expect more than that when blending cash flow and appreciation. 

I know others have had success with lower returns for investors, and good for them. @Michael Ealy has been vocal that he feels skinny deals for investors won't hold up through a downturn, at least if I've properly taken his meaning.

We all do it differently.